Creating professional invoices is essential for getting paid on time and maintaining good relationships with your clients. But if you're running a UK limited company or sole trader business, you might be wondering what information legally needs to be on an invoice, and how to make sure you're doing it right.

In this comprehensive guide, we'll walk you through everything you need to know about creating professional invoices for your UK business, including legal requirements, essential components, special cases like VAT and CIS, and the best tools to use.

UK Legal Requirements for Invoices

In the UK, there are specific legal requirements for business invoices, and these vary depending on whether you're VAT-registered or not.

For Non-VAT Registered Businesses

If your business turnover is below the £90,000 VAT registration threshold, you must include:

• Your business name – If you're a limited company, use your registered company name
• Your business address – Your registered office address for limited companies
• Company registration number – Required for limited companies (found on Companies House)
• Invoice number – A unique sequential number for each invoice
• Invoice date – The date you're issuing the invoice
• Description of goods or services – What you're charging for
• Amount charged – The total amount due, including any applicable taxes
• Payment terms – When payment is due (e.g., "Payment due within 30 days")

For VAT Registered Businesses

If you're VAT registered, you need all of the above plus:

• Your VAT registration number
• Customer's VAT number (if they're VAT registered)
• Customer's full business name and address
• VAT rate applied (20% standard, 5% reduced, or 0% zero-rated)
• Total amount excluding VAT
• VAT amount
• Total amount including VAT

Essential Components of a Professional Invoice

Beyond legal requirements, a professional invoice should be clear, easy to understand, and help you get paid faster. Here's what to include:

1. Clear Invoice Header

Your invoice should be clearly labeled "INVOICE" at the top. Consider including your company logo to make it look more professional and help with brand recognition.

2. Unique Invoice Number

Every invoice needs a unique number. This helps both you and your clients track payments and is essential for your bookkeeping. We'll cover invoice numbering systems in more detail below.

3. Clear Dates

Include both the invoice date and the due date. Being specific about when payment is expected helps avoid confusion and late payments.

4. Detailed Description

Break down what you're charging for. Instead of "Consultancy services - £1,000", use "Website development consultancy, 20 hours @ £50/hour - £1,000". This clarity helps prevent payment disputes.

5. Payment Details

Make it easy for clients to pay you by clearly stating:

• Your bank account name
• Sort code
• Account number
• Payment reference (usually your invoice number)

Consider also offering alternative payment methods like PayPal, Stripe, or GoCardless if appropriate for your business.

6. Contact Information

Include your email address and phone number so clients can easily reach you if they have questions about the invoice.

Special Invoice Cases in the UK

VAT Invoices

If you're VAT registered and charging more than £250 (including VAT), you must issue a full VAT invoice. For amounts under £250, you can issue a simplified invoice with fewer details.

Key points for VAT invoices:

• You must issue a VAT invoice within 30 days of the supply of goods or services
• Include the VAT rate for each item (20%, 5%, or 0%)
• If you supply both VAT and non-VAT items, list them separately
• Keep copies of all VAT invoices for at least 6 years

CIS (Construction Industry Scheme) Invoices

If you work in construction as a subcontractor under the Construction Industry Scheme, your invoices need additional information:

• Gross amount – Total before CIS deduction
• Materials cost – This isn't subject to CIS deduction
• CIS deduction rate – Usually 20% or 30%
• CIS deduction amount – The amount being deducted
• Net payment – What you'll actually receive

Your contractor will deduct tax at source and pay it to HMRC on your behalf. Make sure you keep detailed records of all CIS deductions for your tax return.

Reverse Charge VAT

If you're providing certain services to VAT-registered businesses in other EU countries, or specific domestic services (like construction), the reverse charge mechanism may apply. In these cases:

• Don't charge VAT on your invoice
• Include the statement: "Reverse charge: VAT to be accounted for by the recipient"
• Include both your and your customer's VAT numbers

Proforma Invoices

A proforma invoice is a preliminary bill of sale sent before goods or services are delivered. It's not a true invoice and shouldn't be used for accounting purposes. Key differences:

• Clearly marked "PROFORMA INVOICE" not "INVOICE"
• Acts as a quote or estimate
• Not counted as income until a real invoice is issued
• Useful for international shipments or getting advance approval

Invoice Numbering Systems

A good invoice numbering system helps you stay organized and makes your business look professional. Here are the most common approaches:

Sequential Numbering

The simplest method: start at 001 and count up (001, 002, 003, etc.). This works well for small businesses with straightforward invoicing needs.

Date-Based Numbering

Include the date in your invoice number for easier tracking: 2026-01-001, 2026-01-002, 2026-02-001. This helps you quickly identify when an invoice was issued.

Client-Based Numbering

If you have multiple clients, consider including a client code: ABC-001, ABC-002, XYZ-001. This makes it easy to see which invoices belong to which client.

Project-Based Numbering

For project-based work: PROJ123-001, PROJ123-002. This helps track invoices by project rather than just chronologically.

Payment Terms and Late Payment

Clear payment terms help you get paid on time. In the UK, if you don't specify payment terms, the law says payment is due within 30 days.

Common Payment Terms

• Immediate payment – "Payment due upon receipt"
• 7 days – "Payment due within 7 days"
• 14 days – "Payment due within 14 days"
• 30 days – "Payment due within 30 days" (most common)
• 60 days – Sometimes requested by larger companies
• End of month – "Payment due end of month following invoice date"

Late Payment Rights

Under the Late Payment of Commercial Debts Act, you have the right to:

• Charge statutory interest at 8% plus the Bank of England base rate
• Claim compensation for debt recovery costs (£40 for debts under £1,000, £70 for £1,000-£10,000, £100 for debts over £10,000)

Consider adding a late payment clause to your invoices: "Late payments will incur interest at 8% plus Bank of England base rate per annum."

Tools and Templates for Creating Invoices

Free Invoice Generator

The quickest way to create professional invoices is using a free invoice generator. Bridgly's free invoice generator lets you create professional UK-compliant invoices in seconds with no account required. It includes all the legal requirements and lets you download invoices as PDFs.

Spreadsheet Templates

If you prefer more control, you can create invoice templates in Excel or Google Sheets. This works well for very small businesses but becomes harder to manage as you grow.

Accounting Software

For ongoing invoicing needs, dedicated bookkeeping software like Bridgly can automate much of the process. Benefits include:

• Automatic invoice numbering
• Track which invoices have been paid
• Automatic reminders for overdue invoices
• Integration with your bookkeeping records
• Bank reconciliation to match payments to invoices

Word Processor Templates

Microsoft Word and Google Docs templates work for occasional invoicing but aren't ideal for regular use as they require manual tracking of invoice numbers and payment status.

Common Invoice Mistakes to Avoid

Here are the most common invoicing mistakes UK businesses make, and how to avoid them:

1. Missing Legal Information

Forgetting to include your company registration number (for limited companies) or VAT number (if registered) can cause payment delays and isn't legally compliant.

2. Unclear Descriptions

Vague descriptions like "Consultancy" or "Services rendered" can lead to payment disputes. Always be specific about what you provided.

3. Incorrect VAT Calculations

Common mistakes include applying VAT when you're not registered, using the wrong VAT rate, or not showing VAT breakdown clearly. Double-check all calculations.

4. No Payment Terms

If you don't specify when payment is due, clients may delay paying. Always include clear payment terms.

5. Duplicate Invoice Numbers

Never reuse invoice numbers. This causes confusion in your bookkeeping and can create issues with HMRC.

6. Wrong Client Details

Double-check you're invoicing the correct legal entity with the correct address, especially for larger companies with multiple subsidiaries.

7. Forgetting to Issue Invoices

Some businesses complete work but forget to invoice immediately. Set a reminder to invoice as soon as work is complete or at regular intervals (e.g., monthly for retainer clients).

8. Not Keeping Copies

You must keep invoice records for at least 6 years for tax purposes. Use cloud storage or accounting software to ensure you don't lose important records.

Invoice vs Receipt vs Credit Note

It's important to understand the difference between these documents:

• Invoice – A request for payment sent before payment is received. It represents money you're owed.
• Receipt – Proof of payment sent after payment is received. It confirms money has been paid.
• Credit note – Reduces or cancels a previous invoice, used when you need to refund a client or correct an error.

You issue an invoice when you want to be paid, and a receipt when you've been paid. Credit notes are used to reverse or adjust invoices.

Tips for Getting Paid Faster

Beyond creating professional invoices, here are strategies to improve your cash flow:

1. Invoice immediately – Send invoices as soon as work is complete, not at the end of the month
2. Offer multiple payment methods – Make it easy for clients to pay however they prefer
3. Send reminders – Politely remind clients a few days before the due date
4. Consider deposits – Request 25-50% upfront for larger projects
5. Offer early payment discounts – "2% discount if paid within 7 days" can motivate faster payment
6. Follow up on overdue invoices – Don't be afraid to chase payment professionally
7. Build relationships – Good client relationships generally mean better payment behavior

Invoicing for Different Business Structures

Sole Traders

As a sole trader, you can invoice under your own name or a trading name. Include:

• Your name and any trading name
• Your address
• Your Unique Taxpayer Reference (UTR) if requested by clients

Limited Companies

Limited companies must include:

• Registered company name (exactly as it appears on Companies House)
• Company registration number
• Registered office address

Partnerships

Partnerships should include:

• Partnership name
• Names of all partners or a statement that it's available at the partnership address
• Partnership address

Digital Invoicing and Making Tax Digital

With Making Tax Digital (MTD) requirements, HMRC is pushing businesses toward digital record-keeping. While MTD for Income Tax doesn't require digital invoicing specifically, keeping digital records makes compliance much easier.

Benefits of digital invoicing:

• Automatic backup and storage
• Easy searching and retrieval
• Integration with MTD-compatible accounting software
• Automatic calculation of taxes and totals
• Professional appearance

Summary: Your Invoice Checklist

Before sending any invoice, check it includes:

• ✓ Clearly marked as "INVOICE"
• ✓ Unique invoice number
• ✓ Your business name and address
• ✓ Company registration number (if limited company)
• ✓ Client's name and address
• ✓ Invoice date and payment due date
• ✓ Clear description of goods/services
• ✓ Total amount due
• ✓ Payment details (bank account, sort code, account number)
• ✓ VAT details (if VAT registered)
• ✓ Payment terms

Creating professional, compliant invoices doesn't need to be complicated. Whether you use a free invoice generator, spreadsheet templates, or dedicated accounting software, the key is being consistent, professional, and legally compliant.